Economics and justice

6 Jul

I was watching the discussion program, Question Time’ last night on the BBC. The first question that came up was about the need for a proper inquiry into the latest financial scandal. This is to do with the story which came up recently about Barclays Bank organising a cartel to fix inter-bank lending rates, with the apparent connivance of the Bank of England, and possibly the previous government. This scandal has forced the resignation of the Chairman and CEO of Barclays. The current government wants an inquiry hosted by parliament while the opposition want an inquiry under the aegis of a High Court judge (a judicial inquiry). I have some sympathy for the government in that judicial inquiries take forever, and action is needed quickly. If I could believe there was no element of cover-up it would be good. However, the government is very subservient to the banks. One of the panel on last’s night’s show was John Lydon, better known as Johnny Rotten from the Sex Pistols. He was the wild-card speaker, but made the best point. What Barclays did was fraud on a massive scale. If any other citizen was charged with fraud, would he be brought in front of a committee of MPs or in front of a judge?
Anyhow, a linked story was on the main evening news. The UK banks have increased their reserves by 58% over the last two years, mostly with injections of cash via the Bank of England, trying to get the economy moving again. The rise in lending by the banks over the last two years is less that 0.8%. Business is crying out for investment, and the greatest chance of increasing employment and wealth is in the field of manufacturing. It makes me wonder what the purpose of the banks is, other than creating wealth for their investors. The Thatcher years saw the abandonment of the greater part of the UK’s manufacturing industry in favour of financial services. This created the great expansion of the City of London and the Docklands area, and yuppies. The rest of Britain went to hell. It is time to readdress the balance in the economy, and to invest in infrastructure which can kick-start manufacturing in the provinces. But who is to put up the money. Where are you when we need you J M Keynes? (and FDR).

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